How to set their salary fair

publication date 21.04.2019

how to set their salary fair

Managers are frequently troubled with  the dilemma whether someone´s salary  is high enough  and well in proportion to the person´s performance.   What remuneration will prevent their workers from coming over to the competition. HR workers often argue the competition keeps coming up with new and new bonuses, which situation, gradually, makes it difficult to establish what exactly and how high the bonus should be. But get back to the heart of the matter.  

Nothing lasts forever and neither does the situation of workers. Their viewpoints change in time as well as their living standards, their value on the labour market or their overall economic situation. It is quite often the case that managers do not pay enough attention to those changes as they are kept very busy with the operative work, so they often start resolving the salary issue the moment their workers file a salary complaint or give notice. My recommendation here is as follows: get together with the Human Resource specialists at least once a year and check the salary level of your team. What is the right approach to set the salary fair? 

The manager´s and the worker´s viewpoint 

Everybody tends to perceive their own remuneration differently than the other party. The worker wants to get more while the managers want to give less. One party wants to have the easy life, while the other party wants to keep the company economic performance up in the long term. In practice, the 3-component remuneration is used very often. Let us have a look at what the role of each of the components is from the respective viewpoints of the manager and the worker.  

The worker´s viewpoint

The fixed salary component has to reassure the worker that they will make a living on it.  Indeed, even if he or she makes a grave mistake at work which creates financial losses.  Ideally, they can safely provide for their family. That means it will pay for their housing, utilities, board, work commute, phone. All of the above on some reasonable, basic level, of course. It is public transport at the working class level and it is a car on the managerial level, for instance. Ideas about the need of having the super-fast Internet at home along with some 560 TV channels is really out of place here. 

The variable salary component helps to elevate the living standards and evens up the value of quality work on the market in a particular region.  

Premium/bonus increases the performance and, as it does, also the company´s ability to compete on the market or, alternatively, the worker´s loyalty towards the company. It also reveals the workers´style and, sometimes, their individual interests.  

The manager´s viewpoint 

The fixed salary component is a formulation of correctly delivered standard activities which are specified in the job description document or in the processes or procedures. 

The variable salary component evaluates the quality of the work done. Has the output been delivered in a timely manner and with the parameters that the customer is going to pay for? If not, this component cannot be claimed by the worker. Provided that, of course, the worker was in complete control of the elements that had effect on the output quality.  

Premium/bonus is paid for extra work, work above the standard, an ingenious idea, an innovation, simply put, it is something that the worker is not supposed to do as part of their work duty, yet they will still do it. He or she may enjoy what they do, they have had an idea and finalized that idea into a usable shape.  

Worker´s viewpoint  security  living standard level  loyalty, style, better competitiveness
  Salary fixes component Salary variable component Bonus
Manager´s viewpoint 

standard activities, job description, processes

quality of work done 

above-the-standard activities, new ideas, higher efficiency   

Stick to a just distribution 

Try, first, to get a more detailed picture of a job position. Look up (on platy.cz, for instance) the average salary for a given job position in your local area to be competitive. If you are not competitive, the workes may be kept in your company by something else. Find it. The scale is colourful: interesting work, a great team or even fear.  

Establish a scale of activities for each salary component complete with the adequate finacial amount. The amount is to reflect the workers´ viewpoint, their situation and the value of their work on the market. We have to take into consideration that the situation of a young single worker and the situation of a single mother differ markedly. While the first one can live on CZK 15.000 gross quite well, the other one will not survive. Giving a single mother CZK 1.000 payrise to complement her CZK 15.000 gross salary is regarded as a travesty. This is in no way going to resolve her troubled situation. If her monthly outgoings are not covered with incomings to provide social security, she has to look for resources elsewhere. No egalitarianism applicable here please. Try to fill in the table below first.  

Salary  Salary fixed component Salary variable component Bonus
Ratio, amount CZK 15 000  CZK 5 000  CZK 3 000 
Content
  • customer entered into the database
  • delivery note filled out 
  • offer made 
  • ….
  • offer sent out within 24 hrs
  • filing of delivery notes always complete 
  • 0 claims
  • ….
  • better technical solution
  • saving on an order
  • overtime 

After you have clarified which belongs where - see the table, ask yourselves the question which workers on a particular position meet everything as filled out and in the quality level you need. Only then you will be prepared to make decisions on whether to modify the amount with a given component upwards or downwards, or cancel one altogether.  

Having gained extensive experience in this field, I totally discourage you to have the fixed salary component alone. It also makes little sense when you boast how perfectly you have set all the three components when you have never taken the variable component away from a worker who failed to do quality work. .

Final recommendations for managers and workers

Managers, say goodbye to the idea that your workers will be coming to you with improvement proposals on their own accord without any incentive, that they will be estimating themselves when it is time to do overtime and volunteer. To have a worker come up with an innovative idea requires incentives and that is your responsibility. If you happen to have a worker who knows the company inside out, enjoys his or her work so much that they come up with new ideas without any stimulus, do keep them in a very high esteem.  

Managers, the right awareness of the value of the respective salary component depends on you and your correct communication. Well, technically speaking, mostly on a consistent application of the established model, quality outputs etc.  Warning: the more you speak about money, the more sensitive to money workers will get.  

Workers, going around and saying you have little salary and they will give you more elsewhere is not a good solution. I want more or I go elsewhere is regarded by managers as blackmail and as such flatly discounted by them. Prove your true worth with results, performing the activities and processes correctly. Show them what extra work you have done and ask for a fair remuneration.  

You can learn more in our knowledge lines under the supervision of an experienced advisor in  Motivace a Jak správně chválit a kárat.

Jiří Střelec

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